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Forex Market: USD/CAD daily trading forecast

Friday’s trade saw USD/CAD within the range of 1.2602-1.2798. The daily high has also been the highest level since March 13th 2009, when a high of 1.2846 was recorded. The pair closed at 1.2732, surging 0.91% on a daily basis, which marked a third consecutive daily gain.

At 9:16 GMT today USD/CAD was up 0.27% for the day to trade at 1.2767. The pair touched a daily high at 1.2773 at 9:11 GMT.


United States

Personal Income, Personal Spending

Personal spending in the United States probably dropped 0.2% in December compared to a month ago, according to market expectations, while personal income was probably up 0.2%. Spending rose 0.6% in November, which has been the fastest rate of increase since March 2014. At the same time, personal income increased 0.4% (or USD 54.4 billion) in November, while disposable personal income (DPI) rose USD 42.4 billion (or 0.3%). Personal consumption expenditures (PCE) increased USD 67.9 billion, or 0.6% during the period. Higher-than-expected rates of increase imply good employment conditions and, therefore, are dollar positive. The Bureau of Economic Analysis is to publish the official figures at 13:30 GMT.

Manufacturing PMI by the ISM

Activity in United States’ manufacturing sector probably continued slowing down the pace in January, with the corresponding manufacturing PMI coming in at a reading of 54.5, according to expectations, from a revised down 55.1 in December (55.5 previously). If so, this would be the lowest PMI level since March 2014, when a reading of 53.7 was reported. In December the New Orders Index slipped to 57.3 from 66.0 in November, while the Production Index came in at 58.8, down from the November reading of 64.4. At the same time, the Employment Index improved to 56.8 in December from 54.9 in November. 11 out of 18 industries registered growth during December, according to the report by the ISM.

The Manufacturing Purchasing Managers’ Index (PMI) is a compound index, which represents manufacturing activity in 18 different industries. It is comprised by four equally-weighted components: seasonally adjusted employment, seasonally adjusted production inventories, seasonally adjusted new orders and supplier deliveries. The index is based on a survey of 300 purchasing managers.

Participants can either respond with “better”, “same”, or “worse” to the questions about the industry, in which they operate. The resulting PMI value is measured from 0 to 100. If the index shows a value of 100.0, this means that 100% of the respondents reported an improvement in conditions. If the index shows a value of 0, this means that 100% of the respondents reported a deterioration in conditions. If 100% of the respondents saw no change in conditions, the index will show a reading of 50.0. Therefore, readings above the key level of 50.0 are indicative of optimism (expanding activity) in the sector of manufacturing. In case the PMI slowed down more than anticipated, this would certainly have a bearish effect on the greenback. The Institute for Supply Management (ISM) is to release the official reading at 15:00 GMT.


RBC Manufacturing PMI

Canadian Manufacturing PMI probably slowed down to 52.3 in January, according to the median analysts’ estimate, from 53.9 in the prior month. If so, this would be the lowest PMI reading since May 2014, when the Purchasing Managers’ Index was registered at 52.2.

The PMI report is based on data collected from monthly replies to questionnaires sent to supply managers in over 400 industrial companies. The PMI is a compound index based on five individual indexes: new orders, production, employment, delivery time, stocks of purchases. Values of the index above the key level of 50.0 indicate overall increase in activity in the sector, while readings below 50.0 are indicative of contraction in activity. PMIs are earlier indicators of economic conditions published on a monthly basis and are available much before the publication of relevant data from government authorities. This way they provide earlier insight about economic development trends. In case activity in the sector slowed down more than expected, this would have a bearish effect on the loonie. Royal Bank of Canada (RBC) will release the official PMI data at 14:30 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.2711. In case USD/CAD manages to breach the first resistance level at 1.2819, it will probably continue up to test 1.2907. In case the second key resistance is broken, the pair will probably attempt to advance to 1.3015.

If USD/CAD manages to breach the first key support at 1.2623, it will probably continue to slide and test 1.2515. With this second key support broken, the movement to the downside will probably continue to 1.2427.

The mid-Pivot levels for today are as follows: M1 – 1.2471, M2 – 1.2569, M3 – 1.2667, M4 – 1.2765, M5 – 1.2863, M6 – 1.2961.

In weekly terms, the central pivot point is at 1.2635. The three key resistance levels are as follows: R1 – 1.2895, R2 – 1.3057, R3 – 1.3317. The three key support levels are: S1 – 1.2473, S2 – 1.2213, S3 – 1.2051.

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